Some people feel that budgets can be restricting or that they reinforce a scarcity mindset. Others, however, enjoy a sense of freedom and control with their budget. So who is right? Jesse Mecham, Founder of You Need a Budget (YNAB), joins me to discuss this debate.
Listen in to explore more about why you need a budget and how people can find their individual path with budgeting.
What Do Jesse Mecham and I Cover?
Jesse and I review the following:
- Why people don't like budgets
- How the YNAB Rules help you enjoy budgeting
- Why you should talk to your spouse about life instead of just numbers
Jesse Mecham is a wealth of knowledge and a family man. If you're looking to get on track this year and allow your budget to be a tool for your wealth-building success, check out this interview.
How Jesse Mecham Created His First Budget
When Jesse Mecham first started budgeting, he started from where many people start. He was newly married with a meager income, determined to watch his dollars.
For the first year or so of their marriage, Jesse and his wife worked from a spreadsheet to guide their finances. As their family started to grow, Jesse realized that perhaps other people could benefit from his spreadsheet system as well.
He also continued to have money conversations with his wife. They used their budget to guide their journey as a young couple and as young parents.
The power, he says, is that their budgeting conversations allowed them to think about the bigger picture. Rather than just focusing on their money, they talked about different goals and values. A common question they returned to is “Why are we spending our money here?”
Thanks to those conversations around budgeting, they were able to get on and stay on the same financial page.
Why People Don't Like Budgets
People see budgeting as a restriction, so it makes sense that they think they don't like budgets. Jesse says that like dieting, people worry that there are no more treats ever. Of course, that's not what sustainable healthy eating looks like long term. The good news is that doesn't have to be true of budgeting either.
Jesse says that people have the instinct to associate budgeting with cutting. However, he challenges everyone to turn that belief on its head. Instead of focusing on what you have to eliminate, start from a different mindset. Ask yourself what you want your money to do.
As you get more clarity around your finances and your goals, you will find places where you want to trim expenses. But you may also find categories where you want to dedicate more money. Jesse says the point is to say yes to what you want more of.
By reframing the act of budgeting, many people feel like their money is going further. Some even liken it to landing a raise.
Finding Success with YNAB Rules
One of the things that makes budgeting so powerful is how Jesse Mecham approaches the rules of budgeting. Before you cringe at the thought of more rules, it's important to understand that these aren't your typical money guidelines. In fact, some of them are totally unique to the YNAB budget approach.
The first rule of budgeting says that you need to give every dollar a job. YNAB is a zero-based budget system, which means that every dollar in your budget is allocated somewhere–it could be to spending or it could be to saving. Regardless, every dollar has a purpose.
This rule requires users to be selective. When you follow this approach, you have to really embrace making financial tradeoffs. Doing so helps get you closer to your money goals.
Jesse Mecham's second rule of budgeting is to embrace true expenses. These are not monthly expenses that most of us focus on. Instead, they are larger, less frequent expenses that can sneak up on us.
Jesse uses two different expenses as examples: affording Christmas and our cars. Despite the best efforts from essentially every store that alerts us to the holiday season months in advance, it still sneaks up on people.
The same is true for car repairs. Just because your vehicles are running well now, doesn't mean they always will.
That's why Jesse says it's key to start saving small amounts for these expenses now.
Don't call it overspending! Instead, Jesse Mecham suggests that a better phrase for Rule 3 is reallocation.
If you're ever felt that you failed your budget, there's a good chance you weren't budgeting with Rule 3 in mind. Basically, Jesse says that all budgeters have to be willing to make adjustments. As you move through the month, life happens. Some things go according to plan, but most don't. That means that all budgeters need to be willing to shift and adjust their plans.
Instead of thinking of your budget as permanent, view it as fluid and dynamic. That way, you start to value the process of budgeting more than the initial budget itself.
Rule 4 is unique to YNAB in that it encourages you to age your money. That means that you aren't spending money that is freshly earned. Instead, your goal is to get a month or more ahead of your finances.
Of course, this doesn't happen overnight. But you will be surprised at how quickly you can make progress here by following the other rules. Rule 4 allows you to be more than current with your finances. You're ahead which builds in a buffer, giving you more financial security and flexibility. It's one more way that your budget is anything but restrictive.
Changing The Topic
It's easy to let numbers overcome your focus. After all, budgeting involves a lot of numbers. But the key is to remember what these numbers–and your budget–represent. When you have money conversations with your spouse or as a family, Jesse says it's important to focus on life, not just numbers.
Look beyond your budget itself. Instead, focus on where your budget can take you and what the process of budgeting can unlock. You will learn a lot about yourself in terms of your habits and your priorities.
Closing Thoughts on You Need a Budget
Whether you are just getting started on your financial journey or you are closing in on financial independence, you can make a budget work for you. Remember Jesses Mecham's advice: You need a budget, and you also need to focus on more than just numbers.
If you're ready to see how you can get clearer on your goals and make your money go further, check out YNAB's free trial and build a better budget today.
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Guest Bio – Jesse Mecham
Personal finance expert, speaker, and business leader, Jesse Mecham is the Founder and CEO of You Need A Budget (or YNAB if you are very busy and important). Jesse hosts the You Need A Budget podcast, and is the Wall Street Journal best-selling author of, You Need A Budget. (He’s nothing if not consistent!)
A self-proclaimed “recovering CPA,” he is deeply passionate about teaching individuals, families, and business owners YNAB’s Four Rules to help them gain total control of their money. Jesse first developed the YNAB method and original spreadsheet as a broke, newly married college student who really needed a budget.
In an attempt to make an additional $300/month to cover rent, he sold his spreadsheet online and YNAB was born. Since 2004, the software has grown into a leading personal finance platform and has helped hundreds of thousands of people break the paycheck-to-paycheck cycle, get out of debt, and save more money.
Now, YNAB has a growing team living and working all around the world, and has built a thriving remote culture that earned recognition as Fortune’s #4 best small company to work for. (YNAB was doing remote work before it was cool!)
When not teaching people how to budget, Jesse loves gardening, woodworking, marksmanship, and travel. He also spends a good bit of time with his wife and the seven small people that live in their house.
Jesse Mecham Resources
Other Podcasts and Articles You Might Like
- How to Stick to a Budget – with Kumiko Love (The Budget Mom)
- How to Create Your Mint Budget for Free (in 10 Simple Steps)
- 15 Online Budgeting Apps to Make Your Personal Finance Goals Easy
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MKM PODCAST RESOURCES
- Thriving Families Facebook Group: Join our new FREE Facebook Community!
- One-on-One Coaching: Schedule your FREE 15-minute discovery call with Andy to help you on your Young Family Wealth journey!
- Corporate Financial Wellness Presentation: Contact me to discuss how I can support your company's overall financial wellness.
CARPE DIEM QUOTE
“To change your life, you need to change your priorities”― Mark Twain
Do you need a budget? Or can you live without one and still rock your financial goals?
Please let us know in the comments below.